NEWS,12.07.2012

South China Sea Dispute Addressed In Meeting Between U.S. And China

 

The Obama administration now has a taste of the difficult diplomacy necessary to sharpen the focus of American power on Asia, seeking investment opportunities alongside reforms from rights-abusing governments and working with China while defending U.S. interests.From democratic Mongolia to once-hostile Vietnam and long-isolated Laos, Secretary of State Hillary Rodham Clinton this week faced governments eager to embrace the United States as a strategic counterweight to China's expanding military and economic dominance of the region, while still lukewarm about American demands for greater democracy and rule of law.And after meeting face-to-face with China's foreign minister Thursday as she began to wrap up a weeklong tour of Asia, Clinton lauded Washington's cooperation with Beijing even as she took up the case of several Southeast Asian nations threatened by the communist government's expansive claims over the resource-rich South China Sea.In the discussions across the world's most populous continent, U.S. officials outlined their belief in greater democracy and freedom for Asian nations. The vision is part of a larger Obama administration effort to change the direction of U.S. diplomacy and commercial policy and redirect it to the place most likely to become the center of the global economy over the next century.It is also a reaction to the region's slide toward undemocratic China as its economy has boomed and America's has struggled."As we've traveled across Asia, I've talked about the breadth of American engagement in this region, especially our work to strengthen economic ties and support democracy and human rights," Clinton told reporters Thursday. "This is all part of advancing our vision of an open, just and sustainable regional order for the Asia-Pacific."Clinton will meet Friday with Myanmar's reformist President Thein Sein and introduce him to American business leaders looking for investment opportunities. The U.S. eased sanctions on the once reclusive military dictatorship this week, opening up new opportunities for the administration as it seeks to double American exports.Still, Clinton said she would urgeThein Sein to do more. "Political prisoners remain in detention," she said. "Ongoing ethnic and sectarian violence continues to undermine progress toward national reconciliation, stability and lasting peace. And fundamental reforms are required to strengthen the rule of law and increase transparency."The tour started in Japan, where Clinton assured a long-time ally the U.S. was committed to its security. From there, she visited four countries in China's backyard, part of a larger economic area among the world's most dynamic. Up to now, however, China has taken the most advantage.In each place, Clinton was careful to make the case for American values alongside American business aspirations. It's unclear, however, if both messages were received.In Ulan Bator, she credited Mongolia with liberalizing economically as well as politically, holding it up as a foil to the Chinese model of growth without freedom. And she offered deeper U.S. partnerships with communist governments in Vietnam, Laos and Cambodia, which have looked to Washington for fear of being swallowed up by China's expanding power.But while two-way trade between Vietnam and the U.S. has soared by 40 percent in the last two years, there has been little improvement in the Vietnamese government's respect for dissidents. Laos may seek similar business relations with the U.S., but has yet to show any willingness to rectify its poor labor rights record.What Washington doesn't want with these countries is what it has with Beijing, a partnership of unprecedented economic integration that stops when the discussion turns to human rights, democracy or sharing a vision for the world. It's a relationship that neither side appears able to change, both equally reliant on the other's goods and consumers, while mistrustful of the other's intentions."We are committed to working with China within a framework that fosters cooperation where interests align, and manages differences where they don't," Clinton said.In probably her most difficult work of the week, Clinton pressed Beijing on Thursday to accept a code of conduct for resolving territorial disputes in the South China Sea, a U.S. mediation effort that has faced resistance from China..Meeting on the sidelines of the Association of Southeast Asian Nations' annual gathering, Clinton stressed the different ways Washington and Beijing are cooperating, while Chinese Foreign Minister Yang Jiechi spoke of building even closer U.S.-Chinese ties.Neither side mentioned the South China Sea while reporters were in the room. Afterward, according to U.S. officials, they got into the sensitive talk of the South China Sea, an issue that has caused grave concerns among China's neighbors and the wider world as tensions have threatened to boil over amid standoffs between Chinese and Philippine ships and competing Chinese and Vietnamese claims.While China's claim over the entire area has driven countries closer to Washington, countless hours of talks between U.S. and Chinese officials haven't led to progress on a lasting solution. The waters host about a third of the world's cargo traffic, rich fishing grounds and vast oil and gas reserves – economic opportunities the U.S. would be locked out of if China were to seize total control.Clinton, however, again framed it as a question of principles."The United States has no territorial claims there and we do not take sides in disputes about territorial or maritime boundaries," she told foreign ministers gathered in Cambodia's capital. "But we do have an interest in freedom of navigation, the maintenance of peace and stability, respect for international law and unimpeded lawful commerce in the South China Sea."She singled out "confrontational behavior" in the disputed Scarborough Shoal off northwestern Philippines, including the denial of access to other vessels. The actions she cited were China's, though she didn't mention the offending country by name."We have seen worrisome instances of economic coercion and the problematic use of military and government vessels in connection with disputes among fishermen," she said. "There have been a variety of national measures taken that create friction and further complicate efforts to resolve disputes."Despite publicly exhorting both China and Southeast Asian nations to diplomatically settle their disputes, a State Department release made no mention of the issue and instead spoke of Sino-American cooperation on everything from disaster relief to tiger protection. The issues were clearly secondary, but reflected an effort to compartmentalize any confrontation with Beijing and paint a larger picture of collaboration.

Will The European Debt Crisis Affect Me?

 

With headlines like these, it's easy to get caught up in the frenzy of what's going on in Europe. But before you do, here's a little background. Causes of the crisis differ from country to country. Essentially, it is becoming increasingly difficult for countries such as Greece, Portugal, Spain, Cyprus and Italy to restructure their debt. These countries owe a lot in relation to what they are making, and asked countries who were more financially stable, like Germany, to back up their debts. The hope was that these countries could get better terms on their loans because the loans would be less risky with a second backer (like parents cosigning a mortgage). The terms are still being negotiated. Because no one knows how the debt crisis will play out, there is a risk that our economy will be affected. In the meantime, however, we may be affected by something called headline risk. News headlines are constantly filled with doom and gloom. News stories can have a negative impact on investments, even if they are unsubstantiated. This is known as headline risk.The predictions in these headlines might be very real; however, we really can't predict the outcome of current negotiations. One common example of headline risk is when a company's shares drop due to negative media coverage of an executive scandal. These headlines and other media hype can encourage people to sell their investments and push prices down even further. This sounds very grim indeed. We might assume that our economy will be adversely affected and that we shouldn't invest in international bonds. These are distinct possibilities, but let's look at some facts in order to make an informed decision. 

1. Exports: The United States' total exports comprise 14 percent of GDP. Exports to the eurozone represent only 14 percent of this total. 

2. Investments: At the end of 2011, 30 percent of worldwide mutual fund investments were based in Europe.

3. More than 50 percent of the sales of American-owned foreign affiliates are in Europe.

4. Germany is the sixth largest economy in the world with a budget deficit below 3 percent of its GDP. This is in comparison to the U.S. budget deficit at 12 percent of its GDP. The U.S. is the world's largest economy though the entire EU economy is larger as a group.

 

If you have a business catering to European tourists you may feel the burn. If you have all your money invested in European bonds, the crisis will have a negative impact on your net worth. The debt crisis will most likely have an impact on us, but how large will it be? The effect the European debt crisis will have is a matter of degrees and exposure. It's hard to discern how these unfortunate events will affect us and what actions we should take. In other words, what do we have control over and when are we just being reactive?It is important to have a financial plan in place that you understand and have confidence in. That way you can stick to it, so it can meet your needs over time. We also want to differentiate between headline risk versus a real problem with the investment. The difficulty in this is that there is no way to predict how investments will perform in the future. Headline risk generally has short term effects causing prices to dip, but the effects do not persist in the long run. Could you lose money if part of a mutual fund you own is invested in these assets? Of course, but that doesn't mean you necessarily want to make a rash or reactive decision.It is critical to understand the extent of your exposure and the purpose of your investments. You should also make note of the reason you chose them and potential circumstances when you should make adjustments. This can all be documented in the form of an investment policy statement. There are a lot of moving parts in our global economy that affect our investments. It's hard to know how to react and what the ramifications will be for events like the European debt crisis, as well as subsequent market fluctuations. However, if we put an investment plan in place, we are better prepared to SaveUp in the long run.

 

Public Debt in France and Europe

 

All European countries find themselves confronted with debt problems that impact sustainable public finances. The crisis has not spared France, the world's fifth largest economic power, something that makes private banks quite happy.No European nation has been spared the problem of public debt, even if the severity of the crisis varies from one capital to another. On the one hand, there are the "good students," such as Bulgaria, Romania, the Czech Republic, Poland, Slovakia, and the Baltic and Scandinavian states, all of which enjoy a debt lower than 60 percent of their GDP. On the other hand, there are the four "dunces" whose public debt surpasses 100 percent of their GDP: Ireland (108 percent), Portugal (108 percent), Italy (120 percent), and Greece (180 percent). Between the two extremes are found the rest of the European Union countries, such as France (86 percent), whose debt oscillates between 60 percent and 100 percent of GDP. Conservative European governments, exemplified by Angela Merkel's Germany, believe in the importance of lowering public debt through the application of austerity measures. Similarly, Pierre Moscovici, despite being Finance Minister in François Hollande's new socialist government, has set "deficit reduction" as a priority and is attempting to reduce the deficit to 3 percent of GNP by, among other means, cutting public spending. Still, it is common knowledge that the austerity policies promoted by the European Union, the European Central Bank and the International Monetary Fund that are currently being applied across the Old World, are economically inefficient. In fact, they result in the opposite of what was intended. Rather than restarting growth, reducing expenditures; depressing salaries and retirement benefits; dismantling public services, including education and health care; destroying the work code and social benefits -- in addition to the catastrophic social and human consequences that this causes -- inevitably lead to a reduction in consumption. Inevitably, companies cut production and wages and lay off workers. As a logical consequence, the resources that flow from the state are cut back, while the entities dependent upon the state explode, creating a vicious cycle, for which Greece is the poster boy. Because of this, several European countries now find themselves in recession.In 1973, France did not have a debt problem and the national budget was balanced. Indeed, the state could borrow directly from the Bank of France to finance the building of schools, road infrastructure, ports, airlines, hospitals and cultural centers, something that it was possible to do without being required to pay an exorbitant interest rate. Thus, the government rarely found itself in debt. Nonetheless, on January 3, 1973, the government of President George Pompidou -- Pompidou was himself a former general director of the Rothschild Bank -- influenced by the financial sector, adopted Law no.73/7 focusing on the Bank of France. It was nicknamed the "Rothschild law" because of the intense lobbying by the banking sector which favored its adoption. Formulated by Olivier Wormser, Governor of the Bank of France, and Valéry Giscard d'Estaing, then Minister of the Economy and Finance, it stipulates in Article 25, that "the State can no longer demand discounted loans from the Bank of France." As a result, the French state is now prohibited from financing the public treasury through zero interest loans from the Bank of France. Instead, it must seek loans on the open financial markets. Therefore, the state is forced to borrow from and pay interest to private financial institutions, when until 1973, it could create the money it used to balance its budget through the Central Bank. With this quasi-monopoly, commercial banks now have been granted the power to create money through credit, whereas previously this had been the exclusive prerogative of the Central Bank, that is to say of the state itself. As a result, commercial banks are getting rich off the backs of taxpayers.Furthermore, thanks to the fractional reserve banking system, private banks can lend up to six times more than the amount they actually have in reserve. Thus, for every euro they possess, they can loan six euros through the system of money creation through credit. As though this were not enough, they can also borrow as much money as needed from the Central Bank at a rate of 0 percent to 18 percent, as we see in the case of Greece. Today, money creation through credit accounts for 90 percent of all money in circulation in the euro zone.This situation has been denounced by the French economist and Nobel laureate, Maurice Allais, who wished to see money creation reserved to the state and the Central Bank. "All money creation must be the prerogative of the state and the state alone: Any money creation other than that of the basic state-created currency should be prohibited in a way that eliminates the so-called 'rights' that have arisen around private bank creation of money. In essence, the ex nihilo money creation practiced by the private banks is similar -- I do not hesitate to say this because it is important that people understand what is at stake here -- to the manufacture of currency by counterfeiters, who are justly punished by law. In practice both lead to the same result. The only difference is that those who benefit are not the same." Today, French debt has grown to over 1,700 billion euros. Between 1980 and 2010, the French taxpayer paid more than 1400 billion euros to private banks in interest on the debt alone. Without the 1973 law, the Maastricht Treaty and the Lisbon Treaty, the French debt would be hardly 300 billion euros. France pays 50 billion euros in interest annually, making this the largest item in the national budget, coming even before education. With that kind of money, the government would be able to build 500,000 public housing units or create 1.5 million jobs in the public sector (education, health, culture, leisure), each with a net monthly salary of 1,500 euros. In this way, French taxpayers are robbed of over 1 billion euros weekly, money that accrues to the benefit of the private banks. Clearly, the state has given the richest group of people in the country the fantastic privilege of enriching themselves at taxpayers' expense. And it has asked for nothing in return, and has not made the slightest effort to do so.Moreover, this system allows the financial world to subject the political class to its interests and dictate economic policy through the rating agencies, which are in turn financed by private banks. Indeed, if a government adopts a policy contrary to the interests of the financial market, these agencies lower the rating scores awarded to states, something that has the immediate effect of increasing interest rates.Meanwhile, when the state and the European Central Bank bail out ailing private banks, they do so with interest rates lower than those same financial institutions charge the state. In reality they are conducting de facto nationalizations without receiving the slightest benefit, for example, being granted decision-making authority within the banks administrative councils.The credit system established in France in 1973, and since ratified by the treaties of Maastricht and Lisbon, has but a single goal: to enrich private banks off the backs of taxpayers. It is unfortunate that a debate on the origins of public debt is not occurring in the media or in Parliament itself, even though resolving the debt problem would require nothing more than restoring the exclusive right of money creation to the Central Bank.

NEWS,08.07.2012

Mr. Hollande, Which Mitterand Will You Be?

On December 1, 1983 I was invited to attend Baron Guy de Rothschild's lecture at Columbia Business School reprising why he left France in 1981 and decided to set up a new Rothschild Bank in New York. Impeccably elegant, surrounded by his wife and an entourage, he reiterated his famous statement: "A Jew under Petain, a pariah under Mitterrand" coined when France's then Socialist president had dared to nationalize the venerable Banque Rothschild.Barely a year later in 1984 Francois Mitterrand totally reversed course and began to institute his unique brand of socialist capitalism or capitalist socialisme.During the presidential campaign Francois Hollande consistently evoked the name and legacy of Francois Mitterrand who governed France from 1981 till 1995. Following the Socialist victory (although less than a two thirds majority) in the National Assembly on June 17, he had a very auspicious start on foreign policy, taking a stand in alliance with Italy and beleaguered Spain, against German Chancellor Angela Merkel's draconian calls for continued austerity. Hollande garnered credit for helping to push forward the agenda toward a potential banking union and greater shared responsibility among Euro members.But now reality sets in and Francois Hollande's domestic agenda, modeled on Mitterrand 1981 is under serious scrutiny.Similar to Mitterrand, true to his base, Hollande promised increases in public sector jobs, expenditures, and benefits, lowering the age of retirement and sharp tax increases on corporations, banks and high end incomes (up to 75% marginal rates on income above 1 million euros a year). The policies also include fostering SMEs, increase in R&D and lower tax rates for smaller enterprises.Before presenting his budget, Hollande wisely ordered a report on the state of French finances by the independent Cour des Comptes, but the results present a serious challenge to his agenda. The report makes clear that France already ranks among the highest tax rates, but more importantly, at 56 percent of GDP, one of the highest public spending rates. It calls for curbs on public expenditures, tax reforms rather than increases and stringent discipline to cut the budget deficit.Yet in the last week Hollande has ramped up his rhetoric persisting that the rich, corporations, banks should foot the bill for deficit reduction.As history proved this may be a slippery road to take.Francois Mitterrand came to power on May 10, 1981 as the first president from the Socialist party since Prime Minister Leon Blum's ill fated tenure in 1936. Tired of a decade of post-Gaullist weak and corruption laden administrations, in the throes of a recession with 13% inflation, the French electorate was ready for radical change and welcomed Mitterrand with a deluge of red roses. In his first year Mitterrand increased the public sector, implemented a fifth week of paid vacation, put the retirement age at 60, imposed tax increases on banks and industry, nationalized 39 large and medium size banks including Paribas and Banque Rothschild (the largest French banks, Society Generale and Credit Lyonnais had been nationalized since 1946) and fully took over all major industrial firms including Thomson and even France's oldest company Saint Gobain.By 1983 the results already proved disastrous as France lost its competitive edge in banking, commerce, media, growth stagnated, foreign investment slumped, and the franc weakened compounded by brain drain and capital flight.Mitterrand responded forcefully and brilliantly by making a complete U-turn!Within one year nationalization morphed into "denationlization" i.e. reprivitaization (although the state held the majority shareholding, but there was a resurgence of private investment and confidence in the strong franc policy). Following a visit in fall 1984 to the Reagan White House, Mitterrand gave an interview to the French business publication Expansion: "the American people are a formidable repository of energy and initiative. Their ability to couple industry and universities is a masterpiece of intelligence and practical sense... The lesson I took back is that we must now organize our continent. I admire the virtues of this nation, I want to know them and become closer to them." Strong praise indeed from a Socialist leader in the 1980s!True to his word, in the next decade Mitterrand would oscillate from center left to to center right, from capitalist socialism to socialist capitalism, (including two center-right imposed co-habitation governments led by Jacques Chirac in 1987 and Edouard Balladur in 1993).He won re-election in 1988, justifying these reversals in the name of French prestige and French "Colbertian" tradition which promoted industrial and banking expansion abroad, massive surges in export driven trade, the strong franc ("franc fort") pushing as he stated "socialisme at the limits of liberalism." He established a solid relationship with Reagan, Bush I and Thatcher in the full glory years of "cowboy capitalism." He also created a unique partnership with Chancellor Helmut Kohl, balancing the German dream of a united Europe and the Gaullist legacy of French sovereignty.After total regulation, he espoused greater deregulation after 1987, allowing French style privatization: state influenced industrial policy in the name of competitiveness and economic nationalism.In 1993 as France announced a second wave of privatizations including BNP Renault and Air France, John Fund in the Wall Street Journal wrote "A French Lesson for Clinton" attacking Clinton's initial tax increases and calling on the new president to emulate Mitterrand's pragmatic recognition of "the world wide tide toward lower tax rates and economic freedom."In 2012 these views may all seem discredited and reduced to historical irony, but although Hollande's challenges are different, the larger issues are still very relevant.Implementing a popular but unrealistic set of social measures in a recessionary environment with high unemployment, risking capital flight and lack of investor confidence, moving toward a more contentious relationship with Germany in the middle of the EU debt crisis may appear as short term solutions, but they carry long term risks.To his credit Hollande has chosen seasoned politicians from the left and center of the Socialist Party out of the old Mitterrand team; Lauent Fabius, Mitterrand's PM in 1983, Michel Sapin and Pierre Moscovici who served in more hard left positions under Beregovoy and Jospin in the 1990s.He has shown a more pragmatic stance in EU negotiations, yet never having been in a ministerial position, can he master Mitterrand's skills to parry and counter-parry the demands of his base, an EU in crisis and a skeptical and nervous French electorate?Mitterrand in the mid 1980s proved his elasticity as a politician. Was he a hypocrite, a false Socialist or did he understand the deeper currents of history as he decried capitalism but never underestimated its power; as he defended France's role in all international negotiations from the unification of Germany, Maastricht and Gatt, yet never lost sight that France and Germany had to work together toward a European resolution.Can Hollande emulate this model? Therefore President Hollande, when you evoke Mitterrand, which Mitterrand?

 

Putin orders probe into Russia flood deaths

 

Russia's president ordered investigators on Sunday to determine whether more could have been done to prevent the deaths of at least 150 people in severe flooding in the Black Sea region that turned streets into rivers, swept away bridges and inundated thousands of homes as many residents were sleeping.Vladimir Putin, who was criticized in past years for a delayed or seemingly indifferent response to disasters, flew to the region in southern Russia committed to showing he was taking charge of the situation.He ordered the head of Russia's investigative agency to establish whether enough had been done to warn people about the floods. Federal prosecutors also said they were investigating whether the population had been properly protected from "natural and technological catastrophes."Russia has seen a series of natural and man-made disasters in recent years, many of them blamed on aging infrastructure or lax safety rules.Torrential rains dropped up to a foot of water in less than 24 hours, which the state meteorological service said was five times the monthly average. The water rushed into the hard-hit town of Krymsk early Saturday with such speed and volume that residents said they suspected that water had been released from a reservoir in the mountains above. Local officials denied this, saying it was not technically possible to open the sluices.Federal investigators, however, acknowledged Sunday that water had been released from the reservoir, but they insisted it did not cause the flooding and the dam had not been breached.Krymsk received a total of about 221 millimeters (almost nine inches) of rain overnight, but 50 millimeters (two inches) of that came in less than an hour late Friday, the meteorological service said.The heaviest rain fell in Gelendzhik, a popular seaside vacation spot about 200 kilometers (120 miles) up the coast from Sochi, where preparations are under way for the 2014 Winter Olympics. Novorossiisk, a major Black Sea port, also was affected.The Interior Ministry said Sunday that 150 bodies had been recovered, 139 of them in Krymsk and nine in Gelendzhik, including five who were electrocuted after a transformer fell into the water. The majority of the dead were elderly who were unable to escape the sudden deluge.Residents of Krymsk described a wave of water that washed over the hoods of cars and inundated one-story homes. Some sought refuge on roofs and in trees.Viktor Nikolyuchiny said he and his wife were roused by their daughter, who lives a block away."I came out and the water was already up to my waist," he was quoted by the RIA Novosti news agency as saying Sunday. "My wife has difficulty walking, and if not for our neighbor she would have drowned." He said they waited out the storm at the neighbor's home, which unlike theirs has a second story.Putin arrived Saturday evening and viewed the damage from the air. Television footage of Krymsk shot from Putin's helicopter showed the city of 57,000 people partially submerged in muddy water. The city stadium looked more like a lake.Across the Krasnodar region, more than 5,000 homes were flooded.The Krasnodar region governor said during a meeting with Krymsk residents on Sunday that the first warnings of possible flooding came at 10 p.m. Friday, and the heaviest rainfall was from 1 a.m. to 4 a.m. Saturday."Do you think we could have warned each of you and that you would have gotten up and left your homes?" Gov. Alexander Tkachev asked, according to RIA Novosti.The city set off a siren at around 4:30 a.m., but the residents said they didn't hear it, the news agency reported.As an indication of the lingering concern over the condition of the water reservoir, Putin sent Emergencies Minister Vladimir Puchkov to inspect the dam. Puchkov reported Sunday that he had flown over the dam in a helicopter and saw no evidence of any damage.

 

Heat wave kills 30 in US

 

Americans dipped into the water, went to the movies and rode the subway just to be in air conditioning on Saturday for relief from unrelenting heat that has killed at least 30 people across half the country.The heat sent temperatures soaring over 38°C in several cities, including a record 40.5°C in Washington, St Louis 41°C, and Indianapolis 40°C, buckled highways and derailed a Washington-area train even as another round of summer storms threatened.The heat sent temperatures soaring in more than 20 states.At least 30 deaths were blamed on the heat, including nine in Maryland and 10 in Chicago, mostly among the elderly. Three elderly people found dead in their houses in Ohio had heart disease, but died of high temperatures in homes lacking power because of recent outages, officials said. Heat was also cited as a factor in three deaths in Wisconsin, two in Tennessee and three in Pennsylvania. Officials said the heat caused highways to buckle in Illinois and Wisconsin. In Maryland, investigators said heat likely caused rails to kink and led a green line train to partially derail in Prince George's County, Maryland, on Friday afternoon. No one was injured, and 55 passengers were safely evacuated.Thousands of mid-Atlantic residents remained without power more than a week after deadly summer storms and extreme heat struck the area, including 120 000 in West Virginia and about 8 000 in the suburbs around Baltimore and Washington, DC In the Washington area, the utility company Pepco asked customers to conserve power, saying the heat was stressing the system. "This is becoming a black swan of heat waves, in the sense that it's such a long heat wave, such a severe heat wave and encompassing such a large area," said Chris Vaccaro, spokesman for the National Oceanic and Atmospheric Administration. 

NEWS,31.03.2012.

US to press on with Iran sanctions

President Barack Obama vowed today to forge ahead with tough sanctions on Iran, saying there was enough oil in the world market - including emergency stockpiles - to allow countries to cut Iranian imports.In his decision, required by a sanctions law he signed in December, Obama said increased production by some countries as well as "the existence of strategic reserves" helped him come to the conclusion that sanctions can advance."I will closely monitor this situation to assure that the market can continue to accommodate a reduction in purchases of petroleum and petroleum products from Iran," he said in a statement.Obama had been expected to press on with the sanctions to pressure Iran to curb its nuclear program, which the West suspects is a cover to develop atomic weapons but which Iran says is purely civilian.The overt mention of government-controlled stockpiles may further stoke speculation that major consumer nations are preparing to tap their emergency stores this year."I do think it was interesting that it was laid out there," said David Pumphrey, an analyst at the Center for Strategic and International Studies."It was sort of like a reminder that yes, this is part of the tool kit," said Pumphrey, a former Energy Department official.Oil markets remain tight, the White House said. Surging gasoline prices have become a major issue in the presidential election campaign."A series of production disruptions in South Sudan, Syria, Yemen, Nigeria, and the North Sea have removed oil from the market," the White House said in a statement.France is in talks with the United States and Britain on a possible release of strategic oil stocks to push fuel prices lower, French ministers said on Wednesday.Senior Obama administration officials told reporters that the United States views releasing emergency stocks as an option, but said no decision has been made on specific actions.Oil prices briefly rallied by about 70 cents on the announcement, but later reversed gains to end almost flat as traders turned mindful of the possible use of reserves."There's been a shift from focus on a threat (by Iran) to close the Strait of Hormuz to whether or not reserves are going to be released," said Dominick Caglioti, a broker at Frontier Trading Co. in New York.Going forward, Obama is required by law to determine every six months whether the price and supply of non-Iranian oil are sufficient to allow consumers to "significantly" cut their purchases from Iran.The law allows Obama, after June 28, to sanction foreign banks that carry out oil-related transactions with Iran's central bank and effectively cut them off from the US financial system."Today, we put on notice all nations that continue to import petroleum or petroleum products from Iran that they have three months to significantly reduce those purchases or risk the imposition of severe sanctions on their financial institutions," said Senator Robert Menendez, co-author of the sanctions law.Obama can offer exemptions to countries that show they have "significantly" cut their purchases from Iran, and recently exempted Japan and 10 EU countries from the sanctions.A senior administration official told reporters that talks continue with China, India, South Korea and other importers."Each day I think really we see a number of positive indicators from a broad range of countries," the official said, citing an announcement by Turkey today that it would cut imports of oil from Iran by 10% as an example.Obama faces a delicate balancing act on Iran, leading up to November US general election. On the one hand, he must show voters he is being tough on the Islamic state.But with oil and gasoline prices surging in response to geopolitical risks, he must also avoid steps that would unduly rattle oil markets. That could threaten the global economy and hurt voters already angered by the rising cost of fuel.Obama also faces pressure from some lawmakers in Congress who want to make sanctions on Iran even tighter. The House of Representatives has already passed additional sanctions, and a bill is pending in the Senate.Senior administration officials briefing reporters declined comment on the proposed new sanctions."We welcome the president's determination and applaud the administration's faithful implementation of the Menendez-Kirk amendment," said a spokesman for Senator Mark Kirk, a Republican who has pushed for additional measures."To build on this momentum, we hope the Senate will consider amendments to the pending Iran sanctions bill that would continue to increase the economic pressure on the Iranian regime," Kirk's spokesman said.

Spain announces deep cuts amid public protest

Spain has announced deep cuts to its central government budget as it battles to convince European partners and debt markets it can rein in its budget deficit in the face of growing complaints from the public.The government said it would make savings of 27 billion euros for the rest of 2012 from the central government budget, equivalent to around 2.5% of gross domestic product. The figure includes tax rises and spending cuts of around 15 billion euros announced in December.The cuts come despite popular resistance - a general strike on Thursday disrupted transport, halted industry and saw some minor violence - and against a grim economic backdrop; Spain is thought to have fallen back into recession in the first quarter and has the highest unemployment rate in the European Union."Everyone knows the difficult problem we face in this country, and it calls for special efforts in fiscal consolidation and structural reforms to grow and create employment," Deputy Prime Minister Soraya Saenz de Santamaria said after the weekly cabinet meeting.The centre-right government, which swept to power in November with the largest parliamentary majority in 30 years, has already passed labour market and banking sector reforms that it says can improve competitiveness and reduce wage costs.EU partners have agreed to let Prime Minister Mariano Rajoy aim for a total 2012 deficit at 5.3% of gross domestic product, a less demanding goal than the 4.4% originally suggested but substantially less than last year's 8.5%.Speaking in Copenhagen after an EU ministerial meeting, Spanish Economy Minister Luis de Guindos said the measures would be implemented as soon as possible, adding that any suggestions that Madrid needed emergency international funds was "absurd".Spain is trying to assure its EU partners that it is in control of slashing its deficit and to avoid needing a bailout package like that of smaller neighbour Portugal."What comforts markets are domestic policies. If we don't do what is needed, then there will be no rescue fund that is big enough," de Guindos said. Finance ministers agreed on Friday to increase a financial firewall to 700 billion euros to ward off fears the euro zone debt crisis could spill over to Spain or Italy, much larger economies than those bailed out previously.The Spanish government said it was aiming for a central government deficit equivalent of 3.5% of GDP, a deficit of 1.5% of GDP coming from Spain's regions and a balanced social security budget. Smaller local authorities expect a deficit equivalent to 0.3% of GDP.The regions announced a deficit of 2.9% of GDP in 2011, meaning they would have to cut around 15 billion euros to meet the 2012 target.Details were scarce, with the government due to set the budget before parliament on Tuesday, but some economists are concerned that deep austerity measures could hurt already weakened growth and further endanger the deficit targets.The government said it would slash spending by 16.9% across the ministries, with spending at the Foreign Ministry cut by more than half, and the Industry, Energy and Tourism Ministry taking a cut of more than 30%.Total cuts of over 42 billion euros, between the central administrations and the regional authorities, could be tough for an economy struggling to grow, economists warn."This is as austere as it gets. It's a tightening of fiscal policy until the pips squeak. There can be no doubting the government's willingness to curb Spain's excessive budget deficits," said Nicholas Spiro at Spiro Sovereign Strategy.Rajoy can ill afford to upset nervous bond market investors, who pushed the yield premium for Spanish 10-year debt on Thursday close to their highest levels since early January.The premium investors demand to hold Spanish over German debt dipped slightly after the budget announcement to around 356 basis points, suggesting a cautious welcome for the plan intended to improve Madrid's ability to service its debt.Investors fear, however, that the government may fail to deliver the budget cuts it is promising or will need to announce new measures before the end of the year which could hurt growth."I suspect that the government could be forced to implement further austerity measures later this year, with lingering economic downturn set to place additional strains on an already perilous budget deficit reduction plan," said IHS Global Insight economist Raj Badiani. "The main risk is that the government's tax revenue projections for 2012 look too optimistic."

NEWS,18.03.2012.

US: North Korean satellite launch would be "deal-breaker"

North Korea's announcement Friday of plans to launch an observation satellite in April brought condemnation from the United States, South Korea, Japan and the United Nations due to concerns that the launch could be used to test ballistic missile technology. US State Department spokeswoman Victoria Nuland said Washington now had 'grave concerns' about the February 29 agreement in which North Korea agreed to a moratorium on its nuclear and long-range missile programmes and international nuclear inspections, in exchange for 240,000 metric tons of food aid from the United States. 'We made clear unequivocally that we considered that any satellite launch would be a deal-breaker,' she said Friday. The Kwangmyongsong-3, borne by the Unha-3 carrier rocket, was to be launched between April 12-16 to mark the centenary of the birth of North Korea's founder, Kim Il Sung, who was born on April 15. Nuland said that a launch would be 'highly provocative' and in violation of United Nations Security Council resolutions 1718 and 1874, which banned launches using ballistic missile technology. The February 29 agreement had raised hopes that the six-party talks on Pyongyang's nuclear and ballistic missile programmes - including North and South Korea, the United States, Japan, China and Russia - could be resumed. Nuland said that US officials consulted Friday with other participants, and all were 'caught by some surprise' by North Korea's satellite announcement. 'Now, the question is for all of the six-party members to make clear that this is not the way to go forward if (the North Koreans) want to work with us,' she said. Nuland said that a North Korean launch would create 'tensions,' making 'implementation of any kind of a nutritional agreement quite difficult.' The South Korean Foreign Ministry expressed 'grave concern' over the planned launch, which it said would be a 'clear violation' of United Nations Security Council Resolution 1874, which bans 'any launch using ballistic missile technology.' Seoul said it would 'closely cooperate' with the other members of the six-party talks 'so that North Korea ceases such a provocative action.' In Tokyo, chief cabinet secretary Osamu Fujimura said: 'Japan will strongly urge North Korea not to go ahead with the launch.' The possible satellite launch 'undermines the efforts to settle various issues, which have been made through talks' with North Korea, Fujimura said. A spokesman for the North Korean Committee for Space Technology was quoted by Pyongyang's official news agency KCNA as saying the move would 'offer an important occasion of putting the country's technology of space use for peaceful purposes on a higher stage.' The 'polar-orbiting, Earth-observation satellite will be blasted off southward' from the Sohae Satellite Launching Station in the eastern province of North Pyongan, which lies on the Chinese border and Yellow Sea, the spokesman said. Pyongyang denied any military aspect to the launch. 'The DPRK will strictly abide by relevant international regulations and usage concerning the launch of scientific and technological satellites for peaceful purposes,' the spokesman said. Previous launches of multi-stage rockets by North Korea in 1998 and 2009, which Pyongyang said aimed to put satellites into orbit, were condemned by the US, South Korea and Japan as potential tests of military ballistic technology. The deal, under which Pyongyang was also to stop the enrichment of uranium at a major nuclear facility and permit visits by nuclear inspectors, had raised hopes of a possible resumption of six-nation talks on North Korea's nuclear weapons programme, which have been stalled since late 2008. The talks reached an agreement in 2005 in which North Korea was to dismantle its nuclear programme, but the reclusive communist state has since carried out two nuclear tests in addition to the long-range missile launches. The UN Security Council passed Resolution 1874 in June 2009 in response to the tests. UN Secretary General Ban Ki-moon urged Pyongyang 'to reconsider its decision in line with its recent undertaking to refrain from long-range missile launches.' He sai a launch would be a violation of the UN resolutions.

NEWS,25.02.2012.

Gas Prospects for Russia

 Although petroleum is the primary fuel all over the world, natural gas is becoming increasingly competitive  because it is abundant, cheaper, cleaner and more fuel-efficient. In possession of the world's largest gas reserves, Russia is the largest producer and exporter of natural gas. Russian gas constitutes more than a quarter of natural gas consumed by the European Union, which provides Russia a certain degree of leverage to exercise its influence over Europe. Russia's bilateral ties with transit nations like Ukraine and Baltic states also play a determining factor in the continuity of gas supplies to Europe. The Russia-Ukraine gas dispute in early 2009 very well exposed the vulnerability of Europe to resultant disruptions. The Nord Stream natural-gas pipeline, the first leg of which was commissioned recently, is expected to partly allay the European fears of cut-off since it will deliver gas directly from Vyborg, Russia, to Greifswald, Germany, running underneath the Baltic Sea, thus bypassing transit nations and hence evading potential diplomatic attrition. Moreover, the savings from transit fees will add to economies of scale for both sides. While the EU has a reason for contentment owing to assured gas supplies from Nord Stream, for Russia it will not only bring additional revenue, but also take away a bargaining chip from its neighbours who time and again threaten to disrupt supplies. Even though the West is backing the proposed Nabucco gas pipeline, connecting Turkey to Austria, in an effort to reduce European dependence on Russian gas, serious doubts remain on its political feasibility and economic viability, owing to its diverse gas sources such as Iraq, Azerbaijan and Turkmenistan, which are fragile regions. Moreover, the pipeline is planned to pass through restive areas of the South Caucasus and Eastern Turkey. Therefore, security is a major hurdle circumscribing the prospects of this project. To further undermine Nabucco's prospects, Russia, along with Italy, has launched a rival South Stream pipeline project. It will transport Russian natural gas via the Black Sea to Bulgaria and further to Greece, Italy and Austria. The project, executed jointly by Russian giant Gazprom and Italy's Eni, is expected to be running by 2015, much before the proposed commissioning of Nabucco in 2017. Even if completed in time, Nabucco will be able to feed only a limited number of European countries. Hence, both Nord Stream and South Stream combined are bound to make Russia the undisputed energy feeder to Europe, making it capable of enjoying an unprecedented influence over the continent at a time when all of its major economies are reeling under serious debt crises.

To quote Russian President Dmitry Medvedev during the launch of Nord Stream, "It marks a significant step in relations between Russia, the E.U., Germany and a number of other countries that participated in the project. In the long run, it will bolster security in Europe, including in the energy sector, particularly amid the current economic difficulties.” Expanding the scope of its energy diplomacy of late, Russia has tried to diversify its gas exports by finding new customers. In this attempt, a pipeline has already been laid to China. Another project, Altai gas pipeline, is on the cards. In addition, Russia has proposed to lay a pipeline to the Koreas , in an effort to reduce tensions on the Korean peninsula and give a boost to the impoverished North Korean economy. Plans are also underway to take supplies to maritime neighbor Japan as well as to Southeast Asia. The Eastern Siberia-Pacific Ocean oil pipeline is already pumping Russian crude to Japan, China and Korea. Since Asian economies' appetite for energy is huge, this diversification of supplies to Asia-Pacific will ensure guaranteed demand for Russian gas. It will also enable Moscow to have a greater say in the affairs of the region.This is an opportune moment for Russia. By wisely and judiciously making use of its geography, it can establish itself as a strong pole in the emerging global order.

NEWS,18.02.2012.

Iran deploys warships to the Mediterranean

 

Iran's Navy Commander Admiral Habibollah Sayari

Iranian warships entered the Mediterranean Sea after crossing the Suez Canal on Saturday to show Tehran's "might" to regional countries, the navy commander said, amid simmering tensions with Israel."The strategic navy of the Islamic Republic of Iran has passed through the Suez Canal for the second time since the (1979) Islamic Revolution," Admiral Habibollah Sayari said in remarks quoted by the official IRNA news agency.He did not say how many vessels had crossed the canal, or what missions they were planning to carry out in the Mediterranean, but said the flotilla had previously docked in the Saudi port city of Jeddah.Two Iranian ships, the destroyer Shahid Qandi and supply vessel Kharg, had docked in the Red Sea port on February 4, according to Iranian media.Sayari said the naval deployment to the Mediterranean would show "the might" of the Islamic republic to regional countries, and also convey Tehran's "message of peace and friendship.” The announcement comes amid heightened tensions between Iran and Israel, fuelled by the longstanding dispute over Tehran's nuclear programme and rising speculation that Israel might launch pre-emptive strikes against Iranian facilities. Israeli officials are also accusing Tehran of orchestrating anti-Israeli bombings in India and Georgia as well as blasts in Thailand. Iran denies the allegations. The first Iranian presence in the Mediterranean in February 2011 provoked strong reactions from Israel and the United States, with the Jewish state putting its navy on alert. During the 2011 deployment, two Iranian vessels, a destroyer and a supply ship, sailed past the coast of Israel and docked at the Syrian port of Latakia before returning to Iran via the Red Sea.Israeli leaders denounced the move as a "provocation" and a "powerplay."Iran's navy has been boosting its presence in international waters in the past two years, deploying vessels to the Indian Ocean and Gulf of Aden on missions to protect Iranian ships from Somali pirates. And Iran sent submarines to the Red Sea last June to "collect data," its first such mission in distant waters, while its naval commanders say they plan on deploying ships close to US territorial waters in the future. Iranian naval forces are composed of small units, including speedboats equipped with missiles, which operate in the Gulf and are under the command of the Revolutionary Guards. The navy, using small frigates, destroyers, and three Russian-made Kilo class submarines, oversees high seas missions in the Gulf of Oman and Gulf of Aden. It now permanently has at least two vessels in those areas to escort merchant ships, and has been involved in more than 100 confrontations with armed pirates, according to the navy commander in December.

NEWS,16.02.2012.

Crude oil hits six-month high

Oil drilling rig 

Brent crude rose today for a fourth day in a row, topping $120 a barrel - a six-month high - on worries about supply from Iran and from the North Sea, where output was expected to dip next month. A reversal of the euros losses on the day against the dollar also bolstered crude oil gains on both sides of the Atlantic. The euro surged back after reports that euro zone central banks had agreed to exchange Greek bonds they hold for new bonds as part of a deal to help the debt-strapped country. This raised fresh hopes that Greece's a long-sought debt bailout would be agreed by next week. US crude erased an early $1 decline and rose to a six-week high as upbeat data on jobless claims and housing brightened the outlook for domestic energy demand. The US data also helped lift Brent. US gasoline futures rose to their highest level in 5-1/2 months, at $3.0514 a gallon, for front-month March RBOB , up 1.5 % on the day, adding support to crude. A lower-than-expected gasoline stock build for last week shown in government inventory data released on Wednesday helped boost gasoline futures.In London, ICE Brent April crude was up 97 cents at $119.90 a barrel. Brent hit a session high of $120.38, the highest since an intraday high of $120.40 on August 1.In euro terms, Brent prices were the highest since 2008.US March crude was up 57 cents at $102.37, having fallen earlier to $100.84. It hit a session high of $102.69, the highest since January 12's high of $102.98."Crude futures popped on the euro reversal to the upside against the dollar and the S&P 500 also rose," said Addison Armstrong, senior director of market research at Tradition Energy in Stamford, Connecticut.” US crude, though lagging Brent's gains, is having a good run, considering where it was just days ago and with a lot of fundamental headwinds against it," he added. The spread's widening followed US government data on Wednesday showing a 2 million-barrel increase in stockpiles last week at the US delivery point in Cushing, Oklahoma. Supplies at the hub rose to the highest level since September and the gain was the biggest weekly rise since December 2009.Initial US claims for unemployment benefits unexpectedly fell last week to near a four-year low, suggesting the labour market recovery was gaining steam, and housing starts rose more than expected in January. Iran’s ambassador to Russia said plans to cut off supplies of Iranian crude to Europe would benefit only the Islamic republic, which in the past has been heavily dependent on imported fuel due to restricted refining capacity. In another front, Iran, the world's fifth-largest oil exporter, proposed an early resumption of long-stalled nuclear talks with world powers, according to a letter from Tehran to European Union policy chief Catherine Ashton.On Wednesday, oil prices jumped early after Iranian state television reported that the country was halting its crude exports to six European countries before the EU ban on Iranian crude takes effect in July. This was later denied by Iran's oil ministry, helping pare session gains. Crude oil output from the North Sea, home of the global Brent benchmark, is set to fall in March for a third month due to maintenance work and natural aging of oilfields there.Supply will average 2.18 million barrels per day in March, down 1.4 % from 2.12 million bpd the previous month, data compiled showed on Tuesday.

NEWS,07.02.2012

Worst on the way for snow-hit Eastern Europe

Heavy snowfall across eastern Europe cut off hundreds of villages today and rescue teams struggled to evacuate people in southern Bulgaria where rain and melting snow had caused a dam wall to break, flooding an entire village. A river dike also broke under intense water pressure near Kapitan Andreevo at the border with Turkey, officials said. The cold snap has killed hundreds of people across Europe and temperatures in some countries plummeted to nearly minus 40C (minus 40F).Officials today warned of flooding when temperatures rise and snow melts. Around 146 towns and villages in Romania were isolated with no road or train connections because of blizzards. Up to 174 villages had no electricity, said Alin Maghiar, spokesman for Romania's emergency department. Electricity was also cut off to 300 towns and villages in Bulgaria, roads were closed and several border checkpoints with Romania and Turkey were shut, the Interior Ministry said. The ministry said more heavy snowfall was expected. Melting snow had caused a dam wall to break and flood an entire village in southern Bulgaria on Monday. Four people drowned and more than 50 were evacuated. Four more people died when their cars were swept away by high waters.” It was terrifying," Iliyan Todorov from the village of Biser told Trud daily. "We were warned that the tsunami was coming only five minutes before the wave came...We survived by a miracle".European Commissioner for Crisis Response Kristalina Georgieva said "the worst is yet to come" after visiting Biser."The next two weeks may be really hard. The warmer weather will cause melting of the snow and the situation will most probably worsen," private broadcaster bTV quoted her as saying. In the worst affected country, Ukraine, 135 people were confirmed dead up to Monday and forecasters said bitter temperatures, as low as minus 30 Celsius (minus 22 Fahrenheit), would continue until at least February 15.The Black Sea ports of Varna and Burgas have been closed due to strong winds and Romania's main port of Constanta and other smaller ports were also shut down today. 

Authorities in Serbia said they were preparing to use explosives to break ice on the rivers Ibar and Danube.” An ice cap half a metre deep has formed on the Ibar near Kraljevo and there is a real danger that it could cause the river to overflow into the city," said Predrag Maric, head of the Interior Ministry's emergencies department.He said 100 km of the Danube were freezing over and that it would also be mined.Eleven people have died so far from the cold and snow in Serbia, with the latest victims a 62-year-old man found dead a kilometre from his home near Arilje in western Serbia and a woman killed by falling ice in the capital Belgrade. Serbian power provider TENT, which provides more than 60% of the country's electricity, said it was managing to maintain supplies but was working at full capacity in "extreme" conditions. To the south in Albania, the Kukes Lake on the border with Kosovo - supplying a hydropower plant at Fierze - was frozen over for the first time in more than a decade, putting more pressure on already strained power supplies. The cold weather has increased demand for gas in many European countries. Italy took emergency measures on Monday to deal with what it called critical shortages of Russian gas. Supplies to other members of the European Union mostly improved at the weekend but remained below normal. Russia, which supplies about a quarter of Europe's natural gas, reduced westward flows through pipelines across Ukraine last week citing greater domestic demand because of the extreme weather.